KEY POINTS:
Reports of the kiwi's demise proved somewhat premature as it made a strong recovery today.
Financial markets' volatility has been sending investors scurrying from risk, including from currencies such as the New Zealand dollar. However, a mild rebound in equity markets, albeit after a whippy session on Wall Street, saw money flow back to high-yielding currencies such as the kiwi.
"The risk reduction prompted by concerns about a credit crunch from the shaky US subprime mortgage market has run its course, and that's why the yen has been sold broadly again," said Minoru Shioiri, senior manager of FX trading at Mitsubishi UFJ Securities.
"But worries about the health of the US economy are still there to cap the dollar's gains," Shioiri said.
The kiwi ended on US69.26c compared with US68.53c at the same time yesterday.
A more modest gain against the aussie dollar saw the kiwi close on A88.12c against A87.70c yesterday. Against the Japanese yen, it ended on 81.19, well up from 79.60 yesterday.
The trade-weighted index closed on 68.18 from 67.48.
The kiwi was pushed higher by solid NZ dollar-yen demand, said BNZ currency strategist Danica Hampton.
"Currency markets are still keeping a close eye on global equity markets as a barometer of risk appetite and investor confidence," she said.
"The recovery in US stock markets... has encouraged short-term speculative players to square up short NZD/JPY positions.
"However, market participants are still a bit wary of getting too bullish on the NZD just yet. Investor appetite for risk still appears subdued."
A closely watched volatility index in US remained as high as when the Shanghai market took a dive at the end of last month while bond spreads had widened, she noted.
"While most market participants agree that the fundamental NZ picture is still currency supportive, global sentiment towards carry trades and risk aversion are really taking centre stage."
A breakfast speech by Reserve Bank governor Alan Bollard saying he had been cautious in tightening rates to avoid pressuring the currency was seen as a touch bearish for the kiwi.
The Australian dollar reacted little to the robust domestic jobs data, showing the creation of a solid 22,000 new jobs in February. It had already gained on yesterday's US78.16c local close and ended her on US78.64c.
Reuters currency rates:
5pm today 5pm yesterday
NZ dlr/US dlr US69.26c US68.53c
NZ dlr/Aust dlr A88.12c A87.70c
NZ dlr/euro 0.5237 0.5195
NZ dlr/yen 81.19 79.60
NZ dlr/stg 35.78 35.49p
NZ TWI 68.18 67.48
Australian dollar US78.64 US78.16c
Euro/US dollar 1.3227 1.3192
US dollar/yen 117.21 116.13
- NZPA